Dominic Hopkins looks at the recent decision in the 'Brown Rice' case and explains why this has highlighted two areas of potential risk or difficulty for those entering mediation


Although still viewed with scepticism by some, it is now accepted public policy that mediation is preferred to litigation as a means of resolving disputes.



Conceptually, there is nothing particularly sophisticated about mediation. It is simply a form of assisted negotiation, where the assistance is provided by an independent third party who is trained to help the parties to build the bridge to an agreement. Although the process has softer edges than litigation, it would be a mistake to regard its conceptual simplicity as free of risk or controversy.



Although mediation is now institutionalised in English civil court procedure, the English law of compromise has still a distance to go before it will be entirely comfortable with this now-fashionable accessory.



The recent decision of Stuart Isaacs QC sitting as a deputy High Court judge in Tim Brown v Stephen Rice and ors [2007] LTL 2/4/2007 (14 March) - known as the 'Brown Rice' case - has highlighted two areas of potential risk or difficulty for those entering the mediation ring: first, the use that may be made of what is said and what is written at the mediation (the admissible evidence point); second, what is required to produce a binding settlement (the contract point).



The admissible evidence point

The English law of compromise has long afforded a cloak of confidentiality to negotiations where there is a genuine dispute, such that they cannot be referred to or relied on in court proceedings if a

settlement agreement cannot be reached. 'Without prejudice' privilege is not absolute, however, and there are exceptions. For example, admissibility is not restricted where the issue is about whether or not a binding compromise has been reached.



In Aird v Prime Meridian Ltd [2006] EWCA Civ 1866, the Court of Appeal acknowledged that what goes on in the course of a mediation between the parties to the dispute is privileged, even though the procedure involves a third party. However, one of the parties in the Brown Rice case (supported on the point by the ADR Group, a mediation service provider that was allowed to intervene in the case) argued for a distinct 'mediation privilege' to bar the mediator, as a matter of law and evidence, from giving evidence in respect of what passed at the mediation.



While conceding that this was something that Parliament or the courts may have something to say about in future, the judge did not feel that it was necessary to consider the point, because in light of the terms of the agreement to mediate, neither party could properly (nor were they intending to) require the mediator to give evidence. However, this is an area where there is clearly room for the development of legal principles. For now, it is sensible to address the matter by contract and ensure appropriate confidentiality provisions are included in the mediation agreement.



But the judge found that where the issue for the court was whether or not there was a concluded agreement, and no investigation of the underlying dispute was involved, 'without prejudice' communications that occurred in the context of a mediation were admissible. This was on the basis that all material necessary to determine the point in question should be considered by the court - despite the argument put to him that the terms of the mediation agreement precluded this. The confidentiality provisions in the mediation agreement intended to protect negotiations could not be invoked to restrain the court from considering whether an agreement had been reached. This is not surprising and must be right.



The contract point

The second issue was whether a binding settlement agreement had been reached. Germane to this was a term of the agreement to mediate that the parties signed at the beginning of the mediation, namely that '1.4: Any settlement reached in the mediation will not be legally binding until it has been reduced to writing and signed by, or on behalf of, each of the parties ("settlement agreement").'



As one might expect, the factual circumstances of the case reflected the ebb and flow of intensive negotiation. It is unnecessary to rehearse the facts in detail. Suffice it to say that by the end of the day there was no written settlement agreement. There was a draft court order on the table that represented an offer by the claimant available for acceptance by the defendants by noon the following day, and an alternative proposal had been orally discussed that represented the position of the defendants, ostensibly also available for acceptance by noon the next day. The mediation day ended inconclusively and negotiations spilled over into the next morning without the mediator's involvement. The deadline approached and, so as not to lose the terms he believed were still on the table, the claimant accepted the defendant's alternative proposal by solicitor's letter.



The issues for the court were threefold: was the defendant's 'alternative proposal' one that could be accepted by the claimant - was it a valid offer?; if it was, had it been withdrawn in the negotiating before acceptance?; and was it accepted? The legal heart of the matter was whether all the components existed to create a legally binding settlement.



In short, the judge found that the confusion of events did not demonstrate the necessary meeting of minds, and the components for a concluded agreement did not exist.



Two particular points of wider interest arose: the significance of the terms of the draft court order that had been tabled, in an assessment of whether the required meeting of minds existed; and whether the alternative proposal was an offer accepted 'in the mediation' for the purposes of clause 1.4.



As to the first point, and some may say surprisingly, the judge found that as the draft order (and by extension the alternative proposal) did not address how the litigation was to be finally disposed of - that is, whether by judgment or an order in Tomlin form (the consequences of such procedural matters differing and being of potential importance) the offer was incomplete and therefore not capable of acceptance. Given that, there could be no binding settlement.



On the second point, if the offer was accepted 'in the mediation', then the argument was that the provision in the mediation agreement would impose conditionality on the formation of a settlement agreement, namely that all parties must have signed a written agreement incorporating the terms of the mediation agreement, thereby making the 'acceptance' of the offer 'subject to contract'.



In light of his finding on the first point, this matter assumed more academic than practical significance. Here the judge thought that an event (an acceptance of an offer) after the mediation day, albeit without the mediator, was 'just as much made in the mediation as if it were made at the hearing itself'. Aside from the worrying fact that the terminology of litigation entered the judge's vocabulary in relation to mediation, this view begs the question: when do the conditions applicable to a mediation come to an end? When do the parties step out of those conditions and find themselves subject to an environment that is not governed by the mediation agreement? This is a matter that can and should be addressed expressly by the mediation agreement, to bring clarity to what can be a confusing aftermath to a late night of inconclusive negotiations.



Dominic Hopkins is a commercial dispute resolution partner at Hewitsons and head of its corporate section