In Pentagon Food Group Ltd and Ors -v- B Cadman Limited [2024] EWHC 2513, the High Court considered the contours of the ‘without prejudice’ rule in civil disputes and whether a bespoke “mediation privilege” ought to be recognised. Ultimately, HHJ Tindal concluded that the authorities do not – at least not yet – support the creation of a distinct mediation privilege.
Background
Mr Bernard Cadman, an engineer, incorporated B Cadman Limited (“BCL”) in 1964. Forty years later, in 2004, he established a pension scheme trust called B Cadman Limited SSAS (“the SSAS Trust”). His wife and daughter were also trustees. In 2016, the trustees purchased Portland House, a commercial property in Stoke-on-Trent, which was leased by Pentagon, a company run by an individual named Ashfaq Khan (“Mr Khan”).
A fire destroyed Portland House in May 2017. The following year, the Cadmans, as the freehold owners of Portland House, brought a claim against Pentagon for unpaid rent. This claim was settled at mediation. In 2021, BCL sued Pentagon, alleging that it had either deliberately or negligently started the fire. This was denied by Pentagon and Mr Khan himself. This claim was also compromised at a mediation. In the settlement agreement, it was agreed that Mr Khan’s company would “as soon as reasonably practicable, enter into a contract for the purchase from BCL of the freehold property of Portland House”.
By 2022, Portland House had still not been sold to Mr Khan. Accordingly, Mr Khan issued proceedings claiming specific performance of the settlement agreement. During the course of these proceedings, it was revealed that Portland House was actually owned by Mr Cadman, Mrs Cadman, and Fiona Cadman as trustees of the SSAS Trust, not BCL. Mr Khan obtained leave to amend his claim and add a claim of misrepresentation.
Decision
Before reaching a decision on the merits of the claim, HHJ Tindal first considered the admissibility of the settlement agreement and the statements made at the previous mediations.
The without prejudice rule and its exceptions
HHJ Tindal identified Rush & Tompkins v GLC [1989] AC 1280 as the “leading modern case” on the without prejudice rule, in which Lord Griffith held that:
[t]he ‘without prejudice rule’ is a rule governing the admissibility of evidence and is founded on the public policy of encouraging litigants to settle their differences, rather than litigate to a finish.
The ‘without prejudice rule’ encourages parties to “put their cards on the table” and applies to “exclude all negotiations genuinely aimed at settlement, whether oral or in writing from being given in evidence” (Cutts v Head [1984] Ch 290). It also applies to subsequent litigation connected with the same subject matter.
There are, of course, exceptions to the ‘without prejudice’ rule. As Robert Walker LJ identified in Unilever v Procter & Gamble [2000] 1 WLR 2436, these include when:
- There is a dispute whether ‘without prejudice’ communications have resulted in a concluded compromise agreement;
- Evidence shows that an agreement should be set aside on the grounds of misrepresentation, fraud, or undue influence;
- An estoppel claim may be valid, as one party has made a clear statement on which the other party has relied;
- The exclusion of the evidence would act a cloak for perjury, blackmail, or other ‘unambiguous impropriety’;
- Evidence of negotiations is given to explain delay or apparent acquiescence;
- The claimant seeks to show that he acted reasonably to mitigate his loss in conduct and conclusion of negotiations for compromise of proceedings; and
- An offer is expressly made ‘without prejudice except as to costs’.
In Oceanbulk Shipping v TMT [2010] 3 WLR 1424 (SC), Lord Clarke emphasised that this list of exceptions was not exhaustive and identified a further exception, for aiding contractual interpretation. In the present case, HHJ Tindal extended this exception to interpreting potential implied terms within the contract, stating that (at [83]):
… since implication of terms must not involve re-writing the contract, but only implication that is necessary to make the contract … access to without prejudice material is just as, if not more, likely to enable the Court to implement what the parties really agreed by their settlement. That reassurance is more likely to promote settlement and for parties to negotiate freely than anxiety that they must incredibly precise in their settlement agreement as the Court will take a pedantically literal approach to interpretation or implication of its terms.
HHJ Tindal made clear that these observations were obiter dicta, as it was possible to decide the case based on the non-privileged material alone.
A new “mediation privilege”?
In recent years, there has been a significant rise in the prevalence and prominence of alternative dispute resolution, particularly mediation. This rise has been recognised by the judiciary and legislature alike.
In Churchill v Merthyr Tydfil BC [2024] 1 WLR 3827 (CA), the Master of the Rolls, Sir Geoffrey Vos, concluded that courts have the power to stay proceedings and order parties to engage in a non-court-based dispute resolution process, so long as it does not “impair the very essence of the claimant’s right to proceed to a judicial hearing and is proportionate to achieving the legitimate aim of settling the dispute fairly, quickly, and at reasonable cost” (at [65]). Moreover, just a few months ago, the Overriding Objective in CPR 1.1 was amended to include “promoting or using alternative dispute resolution”.
These developments have led some commentators to advocate for a standalone “mediation privilege”. HHJ Tindal considered this argument, but ultimately agreed with the learned editors of Phipson on Evidence that “the authorities do not – at least not yet – support the view that ‘mediation privilege’ is distinct from ‘without prejudice privilege’” (at [60]). Nevertheless, the contractual and formal context of mediation means it 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” (at [60]).
Ruling
Ultimately, HHJ Tindal ruled that:
- BCL breached the Settlement Agreement as it did not enter into a contract with KEL as soon as reasonably practicable after the mediation in January 2022.
- BCL was liable for misrepresentation. BCL falsely represented that it owned Portland House and Mr Cadman knew, or was at least reckless, as to whether that representation was true. Mr Khan genuinely believed the misrepresentation and acted accordingly.
HHJ Tindal directed that a remedies hearing be listed but also encouraged the parties to try mediation again, commenting: “perhaps ‘third time lucky’” (at [114]).
Comment
For now, the position regarding the ‘without prejudice’ rule remains unchanged. There is still no standalone mediation privilege. However, ‘without prejudice’ statements, including those made at mediation and other forms of alternate dispute resolution, will still be respected, subject to the established exceptions discussed above.
Oliver Fredrickson – Jan 2025
