UK Court of Appeal finds solicitor not negligent for failing to ensure legal enforceability of terms agreed at mediation

In a decision that will be of comfort to legal advisers representing clients at mediation, the Court of Appeal has upheld a finding that a solicitor was not negligent for failing to ensure the legal enforceability of handwritten terms signed by the parties at the conclusion of a mediation: Frost v Wake Smith and Tofields Solicitors [2013] EWCA Civ 1960. 

Key to the Court's ruling was its finding that the terms agreed at mediation were not sufficiently certain and complete to constitute a final agreement capable of being legally binding.   Alhough the parties had made progress in their complex dispute over the division of business assets, there remained numerous issues that needed to be clarified, including proper identification of the assets, treatment of tax consequences and treatment of third parties' interests in some assets.  Much of this detail was not available to the solicitor at the time of the mediation and needed to be the subject of further investigation and agreement between the parties.   

Importantly, the Court rejected a suggestion that the solicitor should have, prior to the mediation, undertaken all the factual and legal investigations necessary to enable a complete and final agreement to be reached and documented at mediation.   The Court held that it was simply 'unrealistic' to expect the solicitor to have spent the client's time and money in immersing himself in the level of detail that would have been necessary, when it was impossible to know from the outset how the mediation would develop.

The decision is a welcome acknowledgment of the flexible and often iterative nature of the mediation process.  As the Court noted, "it would be regrettable if any decision of this court were to cause practitioners to approach the process of mediation with anything other than the maximum flexibility".   The informality of the mediation process and its ability to result in pragmatic compromises could be undermined if parties were to regard the conclusion of an immediately binding agreement as a necessary requisite of a 'successful' mediation.  The Court stressed this by observing that it "should be a cause for neither surprise nor dismay that the process of mediation did not in this case at the first session result in an immediately enforceable agreement."

However, the judgment does suggest that the Court would have been more receptive of a complaint (if it had been properly pleaded and proved) that the solicitor had failed in his duty to warn the client as to the non-enforceability of the provisional agreement.   Legal advisers should heed the Court of Appeal's warning in this regard and ensure that their clients understand the nature of the mediation process and the fact that compromises reached may not be capable of enforcement through the courts without further agreement between the parties.