The without prejudice rule: High Court finds there is no separate "mediation privilege"

The High Court has found a party to a settlement agreement reached at mediation liable for misrepresentation and breach of the agreement, where it emerged after the mediation that the party was not in fact the legal owner of a property that the agreement required it to transfer. In doing so, the court considered the extent to which evidence of what occurred at the mediation could be relied on, under one of the limited exceptions allowing evidence of "without prejudice" (WP) settlement negotiations to be admitted for certain narrow purposes: Pentagon Food Group Ltd and others v B Cadman Ltd [2024] EWHC 2513 (Comm).

Notably, the judge's analysis of the relevant WP exceptions includes an opinion – albeit obiter – proposing "modest" expansions to the circumstances in which two key exceptions apply:     

• The exception that admits evidence from WP negotiations of facts within the parties' common knowledge where relevant to interpreting contractual words (the Oceanbulk exception) should apply similarly where the facts are relevant to whether a contractual term can be implied.
• The exception that admits evidence to show that an agreement should be set aside for misrepresentation, fraud or undue influence should extend to negligent misrepresentation.

The judgment is also of interest for comments addressing the relevance of the WP negotiations being in the form of a mediation. While the judge acknowledged the "undoubted enhanced importance of mediation" in recent years, he was not convinced that this justified an enhanced form of "mediation privilege" beyond traditional WP, with narrower exceptions.    

For more information see this post on our ADR Notes blog.