9.1 Introduction
Mediation confidentiality is often characterised as the cornerstone of the mediation process. The legal protection of mediation evidence can emanate from common law privilege, contract and statute. If comprehensive statutory protection is available, parties may not have to protect from disclosure mediation evidence in their contract or rely on common law privilege with its various exceptions. While a balance is required between supporting mediation and not freezing litigation or upholding illegality, this balance is not easy to achieve. The approach of making mediation confidentiality ‘absolute’ appears to create straightforward rules for an informal process, but it can prove to be either overreaching or inappropriate. While uniform laws offer consistency, experience indicates that they fail to gain sufficient traction or acceptability to have widespread impact. While mediation confidentiality must be protected, it is important that courts retain the power to admit mediation evidence in appropriate circumstances.
9.2 Confidentiality in Commercial Mediation
Confidentiality is often characterised as the cornerstone of mediation.Footnote 1 Confidentiality makes the mediation process attractive to potential users as it insulates them from negative publicity, protects them from disclosures subsequently being used against them and encourages settlement by providing the parties with a safe space to share their needs and interests and ultimately solve problems collaboratively. The integrity and reputation of mediation and mediators are also protected, and the impartiality of mediators is reinforced as confidentiality reduces the pressure on them to make post-mediation disclosures. Confidentiality in the context of mediation operates on a number of levels. It can cover the information shared in the private caucus sessions between the mediator and each party, where parties are encouraged to be open and honest in a safe environment where only the mediator is constrained, and the relevant party can waive their rights to confidentiality. It can also cover the entire mediation process, preventing public disclosures and excluding the admissibility of mediation evidence in legal or arbitral proceedings. Confidentiality imposes obligations on both the mediator and the parties. One of the most important issues affecting the confidentiality of the mediation process is the extent to which mediation evidence can be used in a simultaneous or later arbitral, judicial or administrative proceeding. In practice, mediation is not always as confidential as it is often claimed to be.Footnote 2
Parties are often unaware of the scope of the confidentiality protection they are entitled to in a mediation. In international disputes, parties frequently overlook the impact of the procedural rules that will govern proceedings if the mediation fails. If these procedural rules permit limited discovery in subsequent proceedings, maintaining strict confidentiality of information shared during mediation will be particularly important.Footnote 3
In determining whether a mediated settlement agreement should be enforced, the courts in the USA have investigated what happens during the mediation process.Footnote 4 While the courts will not need to look to evidence outside the contract for interpretive purposes where there is no ambiguity, an investigation of the mediation process is likely to be required to determine whether an oral contract exists where there is no written agreement, and to review situations where ambiguities are claimed to clarify their meaning. The various contract law defences to enforcement of mediated settlement agreements, such as duress, lack of capacity, lack of authority, mistake and fraud, are all largely determined by what happened at the mediation. Both courts and policy makers have struggled to strike the appropriate balance between assessing what took place during a mediation to understand claims that parties have made, and protecting mediation confidentiality. Identifying the relevant circumstances and the types of evidence permitted, including the extent of mediator testimony, have all been central causes of concern.Footnote 5
Laws in the USA preclude broad categories of post-mediation enforcement disputes, limit the scope of other disputes, and help mediators and participants develop practices that also reduce areas of potential enforcement conflict. The disputes that remain require the courts to strike a careful balance between the need for evidence to assess the claims made and the need for mediation confidentiality.Footnote 6 While an appreciation of the importance of mediation confidentiality would appear to be universal, court decisions in the USA cover the entire spectrum of attitudes. For example, courts have allowed limited disclosure of mediation communications based on a requirement for the evidence, found waivers of confidentiality because of the nature of the claims made, barred all evidence relating to mediation communications, ignored mediation confidentiality, and dealt with the issue as if it were any other contract with relevant evidence gleaned from all available sources, despite statutory protection of mediation confidentiality in some cases.Footnote 7
9.3 Two Competing Public Policies
Determining the extent of confidentiality in mediation involves balancing two competing public policy interests. One is the interest in promoting and encouraging the settlement of disputes outside the court system and in protecting processes such as mediation that facilitate and support this policy. This was summed up by the High Court of Australia in Field v. Commissioner of Railways (NSW), where the majority of the Court stated:
The law relating to communications without prejudice is of course familiar. As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose upon them.Footnote 8
The other public policy interest is the interest in courts and tribunals having access to evidence regardless of what has transpired in mediation. This was referred to by Rogers CJ in AWA Ltd v. Daniels (t/a Deloitte Haskins & Sells), who stated:
[A]s a matter of principle it would be entirely too easy to sterilise other admissible, objective, evidence simply by saying something about it in the course of Mediation … That of course is not to be contemplated.Footnote 9
While the principle of freedom to contract supports the maintenance of confidentiality as prescribed by the parties, if it is too wide it will sterilise too much evidence and seriously undermine the litigation or arbitral process. If mediation confidentiality is too narrow, it will discourage parties from entering mediation and from using their best endeavours to settle through the process. A balance is required between supporting mediation and not freezing or frustrating litigation or upholding illegality, and the courts are required to weigh up the two competing public policies in deciding whether to allow or prevent disclosure of mediation evidence.Footnote 10
9.4 Approaches to Protecting Mediation Evidence
9.4.1 Common Law Privileges
The most obvious way the law may attempt to protect mediation information is by creating a privilege.
9.4.1.1 ‘Without Prejudice’ Privilege
Where settlement is not reached, evidence of oral or written offers or admissions made in good faith to reach a settlement are inadmissible in subsequent litigation relating to the dispute. This rule is predicated on the policy that the law should encourage disputing parties to negotiate freely and based on the parties’ implied intentions.Footnote 11 The ‘without prejudice’ privilege applies regardless of whether litigation has commenced or if the parties expressly provided that their negotiations are without prejudice.Footnote 12 It can be expressly or impliedly waived by the parties, and the mediator has no common law right to veto disclosure. Disclosure of privileged information to a mediator is not a waiver as it would be to a court or tribunal during a hearing. A court can order disclosure in appropriate circumstances, where a statutory or common law exception requires it, such as for reasons of public policy, reasons of criminality or because disclosure is outside the scope of dispute. For example, information that can be independently evidenced before a court or tribunal, such as an unqualified admission concerning objective facts, will not be excluded simply because it was disclosed in a mediation. Australian courts have confirmed that the ‘without prejudice’ privilege applies to mediation,Footnote 13 even where the process is employed to reduce the scope of litigation and only for resolving part of a dispute.Footnote 14 Where ‘without prejudice’ negotiations result in a settlement, evidence of agreements and statements made are subsequently admissible in arbitral or judicial proceedings.Footnote 15 Consequently, at common law, consistent with the policy favouring the enforcement of settlement agreements, a settlement reached following ‘without prejudice’ negotiations can be pleaded and proved for enforcement purposes.Footnote 16
In the normal course, it is only where all the parties to a mediation agree to waive the privilege that a court can access the information.Footnote 17 However, there are numerous exceptions to the ‘without prejudice’ privilege, where the court will admit evidence despite opposition from a party.Footnote 18 For example, the court may admit ‘without prejudice’ communications to determine whether they led to an agreement.Footnote 19 Allegations of misrepresentation, fraud, undue influence and duress can result in the court admitting such evidence.Footnote 20 A party may be able to call evidence to establish that they relied on a ‘without prejudice’ statement to their detriment, and enforce their right to what they relied upon, on the basis of an estoppel.Footnote 21 An act or statement amounting to ‘unambiguous impropriety’, such as threats that induce settlement, can result in the privilege being lost, and the courts take a restrictive approach when applying this exception focussing in particular on whether the privilege was abused.Footnote 22 The court may also wish to admit evidence to investigate delay where a failure to engage is claimed: for example, to prove the fact that communications have not ceased.
As noted above, evidence will be admitted where a waiver of ‘without prejudice’ privilege is asserted. The privilege may also be set aside to determine the costs order that should be made where ‘without prejudice except as to costs’ was used by the parties. Where there was no existing dispute for the privilege to protect communications, it will not apply. Admission of statements as evidence that they were made may also be a basis for setting aside the privilege, but again a restrictive approach is likely.Footnote 23 Facts that are identified during a negotiation that led to a settlement may also be admitted into evidence where they may assist in understanding the true meaning of the negotiated settlement.Footnote 24
In general, the courts in EnglandFootnote 25 are reluctant to investigate what happens during the mediation process. As Dyson LJ remarked in the leading English case of Halsey v. Milton Keynes NHS Trust:
We make it clear at the outset that it was common ground before us (and we accept) that parties are entitled in an ADR to adopt whatever position they wish, and if as a result the dispute is not settled, that is not a matter for the court. As is submitted by the Law Society, if the integrity and confidentiality of the process is to be respected, the court should not know, and therefore should not investigate, why the process did not result in agreement.Footnote 26
The English courts will admit evidence of a failure to mediate and not treat the pre-mediation period as privileged, unless communications during this period are specifically made ‘without prejudice’.Footnote 27 There are a number of cases where judges have received evidence about what happened at a mediation with the parties’ consent to determine the issue of costs.Footnote 28 In Chantrey Vellacott v. The Convergence Group plc,Footnote 29 the defendants had lost at trial, and the claimants sought an order for their costs of an unsuccessful mediation attempted three years earlier. In making his decision, the judge received evidence regarding offers exchanged at the mediation and awarded the claimants their mediation costs due to the defendants’ intransigence and unrealistic position both during the mediation and trial. Similarly, in Malmesbury v. Strutt & Parker,Footnote 30 the judge held that the claimant had adopted an unreasonable and unrealistic position during the mediation and reflected this in the costs order. The Court remarked that unreasonable behaviour during a mediation is similar to an unreasonable refusal to mediate. In SITA v. Watson Wyatt; Maxwell Batley (Pt 20 defendant),Footnote 31 the judge heard evidence of what a mediator had allegedly said during a mediation in determining that Maxwell Batley’s refusal to mediate was not unreasonable. The evidence in these three cases was available to the Court only because the parties waived privilege; they illustrate that the confidentiality of the process belongs to the parties and not to the mediator or the process.
In Aird v. Prime Meridian Ltd,Footnote 32 proceedings were stayed so that the parties could attempt mediation, and an order was made for the parties’ experts to produce a joint statement. The mediation failed. During the subsequent litigation, the defendant sought to rely on the joint statement, claiming it was not privileged as it had been prepared in accordance with a court order for the purposes of litigation. The English Court of Appeal agreed, deciding that the joint statement produced by the expert witnesses in accordance with a court order was not privileged, despite the fact it was made with a contemplated mediation in mind. The order did not state that the joint statement would be privileged.
In the later case of Brown v. Rice,Footnote 33 the claimant had made a series of assertions that a binding agreement had been reached during a mediation. The agreement to mediate at clause 1.4 provided that a mediated settlement would not be binding unless it was reduced to writing and signed by the parties. The judge held that communications during the mediation process could be admitted as evidence to establish whether there was a settlement, over objections from the defendant and the mediation service provider, demonstrating the limits of privilege and confidentiality. The Court held:
[I]t is possible in any given case that the parties may have expressly or impliedly agreed to vary or waive those provisions or that a party may be estopped from relying on them or that a collateral contract has arisen which is not subject to clause 1.4, with the consequence that a concluded settlement was or must be treated as having been made. These are matters which a court is entitled to investigate and determine by way of exception to the without prejudice rule.Footnote 34
The judge effectively reasoned that parties may vary, waive or even be estopped from asserting the writing requirement in the agreement to mediate. Ultimately, the issue was whether a settlement had been reached and not the reason why it had not been reached, and, on the facts, no settlement had been concluded. This case illustrated to mediators at the time that the protection given to the mediation process may not be as comprehensive as mediators had informed parties it was. Confidentiality attached to the mediation process only to the extent it attached to ‘without prejudice’ negotiations, such that the limits of the ‘without prejudice’ principle applied with equal force to mediation.
In Cumbria Waste Management Ltd v. Baines Wilson,Footnote 35 the Court had to decide whether disclosure of mediation documentation could be ordered against one party’s wishes because of an exception to the ‘without prejudice’ privilege and whether the confidentiality provisions of the agreement to mediate precluded disclosure where one of the parties did not consent. The Court found that on the basis of the ‘without prejudice’ privilege and the contracted confidentiality between the parties, it would be wrong to order the disclosure of the mediation documents. Hence, the parties had a joint, but not several, right to waive ‘without prejudice’ privilege. In particular, the Court wanted mediators to be free to conduct mediations without fear that their notes might be disclosed to others, and saw this as an exception to the general rule that confidentiality is not a bar to disclosure of material to a court. The Court said:
[W]hether on the basis of the without prejudice rule or as an exception to the general rule that confidentiality is not a bar to disclosure, the court should support the mediation process by refusing, in normal circumstances, to order disclosure of documents and communications within a mediation.Footnote 36
This decision suggests that the courts in England may be willing to find that there is a special mediation privilege. However, as Cumbria Waste Management is a first instance decision, a court of appeal decision, or statutory intervention, would be required for mediators, lawyers and parties to know the precise contours of mediation confidentiality in England.
9.4.1.2 Other Participants and Interested Parties
Anyone who was present at a mediation is compellable as a witness once the parties have waived privilege. As witnesses, experts and other third parties who may be present during the mediation process are not usually parties to the agreement to mediate, or to confidentiality provisions in the settlement agreement, such parties should sign confidentiality agreements before participating in the process. The confidentiality clause of an agreement to mediate can (but does not always) bind legal advisors. While the ‘without prejudice’ privilege can only be asserted by participants in a mediation, parties who settled have been successful in using it defensively against other interested parties in appropriate circumstances.
In Rush & Tompkins Ltd v. Greater London Council,Footnote 37 the main contractor in a construction dispute reached a mediated settlement with the owner. The subcontractors, who were not involved in the mediation, wanted to gain information about the weight their claims carried in the mediation, to pursue their claims against the contractor. Although a settlement had been reached, the Court held that the public interest required the extension of the privilege protection to cover the situation of the contractor, owner and subcontractors. The decision provides an exception to the established principle that the protection provided by the privilege ends when settlement occurs, and reveals the degree to which the courts are willing to adapt common law privileges in the mediation context.
An Australian court subsequently extended the principle to prevent disclosure of documents provided in a mediation to a party who did not participate in the process.Footnote 38 While such decisions are encouraging in terms of protecting mediation evidence, each case is likely to turn on its own facts and focus on who is seeking the information, from whom it is being sought and the purposes for which it is sought.Footnote 39
9.4.1.3 Legal Professional Privilege and Lawyer–Client Protection
Legal professional privilege is a common law protection that covers documents, data and other communications that arise from legal proceedings, or from giving or obtaining legal advice, where the dominant purpose is legal advice. A strong suggestion of any other equal or more dominant purpose will destroy a claim of privilege. It enables clients and their lawyers to communicate openly, confidently and without fear of being forced to disclose their confidential communications. It is subject to exceptions. For example, it does not apply where communications are made to pursue any illegal purpose. Nor does it apply to any fact that reveals to a lawyer that a crime or fraud has been committed since the lawyer became involved. As it is intended to protect clients, a lawyer can disclose the communication with a client’s express consent. The privilege can also be waived by a client making an intended or unintended disclosure, or if a client takes an action against their lawyer regarding the lawyer’s advice. While the privilege is traditionally applied in judicial, administrative and tribunal proceedings where people can otherwise be compelled to furnish information, communications created for the purpose of giving or obtaining legal advice would cover work prepared by lawyers for clients going into mediation.Footnote 40
Although the privilege can be waived by a party voluntarily disclosing communications to a party on the other side, disclosure to a mediator of documents such as legal opinions, that would otherwise be privileged, should not amount to a waiver as such disclosures are for the limited purpose of helping the parties reach a settlement. Otherwise a party on the other side could demand production of the documents if the matter ultimately went to trial. This would be particularly problematic where an agreement to mediate provided that the mediator can request documents from the parties. This is consistent with the approach taken in Farm Assist Ltd (in liq) v. Secretary of State for the Environment, Food and Rural Affairs (No 2).Footnote 41 In this case Ramsey J clarified that, in England, a communication remains privileged even where the client shares it with the mediator on a confidential basis.Footnote 42 Consequently, the client can restrain the mediator from unauthorised use of the information.Footnote 43
In the USA, lawyer–client communications are protected by attorney–client privilege and the related work product doctrine under rule 502 of the Federal Rules of Evidence. The work product doctrine protects materials prepared in anticipation of litigation from discovery by opposing counsel and is broader than attorney–client privilege. It may be overcome by a showing of necessity. Civil law counterparts of lawyer–client privilege include the ‘professional secret’ in France and the ‘duty of silence’ in Germany and Austria which are positive duties that extend to courts, tribunals and other bodies.Footnote 44
9.4.1.4 A Privilege for Mediation or Mediators
‘Without prejudice’ privilege covers only the parties in a mediation; the mediator or the process will only be covered over and above the other common law privileges if this is provided for by statute. No specific privilege for mediators exists at common law; nor is there any authority extending the ‘without prejudice’ privilege to mediators. As mediators have not been viewed traditionally as possessing sufficient interest to warrant this protection, where there is no statutory or enforceable contractual protection, mediators are compellable witnesses. However, existing categories of privilege could be extended to mediators by applying the policies underlying other privileges to them. This would also avoid credibility conflicts between parties and mediators. If a privilege were extended to mediators, the consent of both the mediator and the parties would be required to waive it.
A related issue is the possibility of a privilege covering the whole mediation process, which would encourage a candid flow of information in a mediation. The English courts have indicated that a distinct mediation privilege may be developed.Footnote 45
9.4.1.5 Testimony by the Mediator
From the court’s perspective, the mediator is often best placed to give the court an independent perspective of what transpired at the mediation, including the parties’ intention to be bound by the settlement, whether there was a misrepresentation, whether coercive behaviour occurred or whether a party was unwell to the extent that they lacked sufficient competence to settle. While some US courts have refused to admit mediator testimony,Footnote 46 many others have admitted such evidence, relied greatly on mediator testimonyFootnote 47 and used the mediator to determine the credibility of conflicting party testimonies.Footnote 48
Evidence provided by a mediator has proved crucial in Australia. Where a party in a mediation rejected allegations of misleading and deceptive conduct and unconscionability by another, the Court placed ‘considerable weight’ on the mediator’s evidence.Footnote 49 An Australian court also granted disclosure of mediation evidence, even though the mediator had specified to the parties when the mediation started that his notes would not be made available to them.Footnote 50 While the Court acknowledged that disclosure would fundamentally affect the mediation process, it believed it was essential in this case as the evidence was required to explain the parties’ intention regarding the settlement.Footnote 51
9.4.1.6 Mediator Secrets Privilege
A ‘mediator secrets privilege’ is a proposed option that would enable the parties to separately share information with the mediator, and facilitate the mediator to assist them in a protected environment.Footnote 52 Once the information was shared, either directly between the parties or as an authorised disclosure through the mediator, it would stop being a secret and lose the mediator secrets privilege, attracting only the ‘without prejudice’ privilege that applies to all information shared between the parties, with its exceptions.
The proposed privilege would be justified due to the unique role of the mediator in receiving information from one party and not sharing it with others, and to help the mediator use the knowledge gained to guide the parties towards a mutually agreeable settlement.Footnote 53 Analogous to communications under legal professional privilege, mediation secrets would be protected unless there was mediator misconduct. This would appear to be supported by public policy in the same way that legal professional privilege is. The privilege would not cover everything mediators learn in mediation but would be strictly limited to the information shared by a party with the mediator in the private caucus sessions. Consequently, it should not interfere with the recognised exceptions to the ‘without prejudice’ principleFootnote 54 that provide the courts with windows into the mediation process to assess and then determine disputes of that nature. It is difficult to imagine how the determination of any of those disputes would be assisted by the disclosure of mediator secrets, with the rare exception of mediator misconduct.Footnote 55 Mediators would have to be open about the circumstances that indicate illegality, either civil or criminal, such as fraud, money laundering or tax evasion, where ‘mediator secrets’ may have to be revealed. Apart from legal and policy requirements, this openness will most likely be required by the code of conduct under which the mediator, and the process, would operate.Footnote 56
Ideally, this privilege would be established and develop as part of the common law in relevant jurisdictions, as a recognition that the public interest in the maintenance of confidentiality in relation to particular forms of communication in a mediation outweighs the competing public interest in the court gleaning all information that it feels may be required to determine a dispute.Footnote 57
9.4.2 Contract
‘Without prejudice’ privilege (discussed in Section 9.4.1.1) is a rule of evidence; it does not make information that it protects confidential, but simply prevents it from being used in evidence at a subsequent trial. Hence, confidentiality, in the absence of a statute, must be contracted to ensure that information shared within the mediation process is protected.Footnote 58 This is the oldest way of attempting to protect mediation information. It involves the parties and the mediator, together with any other participants, entering into a confidentiality agreement in which each party agrees to keep information disclosed in the mediation confidential, and not to testify in subsequent arbitral or judicial proceedings.Footnote 59 While these provisions have not been extensively considered by courts in jurisdictions such as Australia, the traditional view is that public policy favours the enforcement of confidentiality clauses in agreements, but there are limitations on the types of remedy available for breaching such provisions.Footnote 60
While confidentiality agreements are persuasive as to the parties’ intentions, they often include the exception that a party may reveal mediation evidence where a law or court requires it. Even without this exception, a contractual duty to keep mediation information confidential can prove to be unenforceable due to the public policy that courts are entitled to every person’s evidence; even where such a provision is deemed enforceable in subsequent proceedings between the parties, it may not be enforceable in proceedings involving third parties.Footnote 61
Nonetheless, in the absence of a statute, an agreement may be the only way that the parties can attempt to protect mediation confidentiality. In Ontario, for example, there was no statute or rule of practice to protect mediation confidentiality when the issue came before the Ontario Superior Court of Justice in Rudd v. Trossacs Investments Inc.Footnote 62 The plaintiffs were seeking an interim order requiring the mediator to give evidence of events at a mediation, including the terms of settlement. The plaintiffs claimed that the record of the settlement, which was handwritten by the mediator with the assistance of counsel and executed at the mediation, inadvertently excluded Morris Kaiser (‘Kaiser’) as a party to the settlement. The defendants denied that Kaiser was a party to the settlement agreement. The Court referred to the mediation agreement which contained the following confidentiality provision:
The parties agree that all communications and documents shared, which are not otherwise discoverable, shall be without prejudice and shall be kept confidential as against the outside world, and shall not be used in discovery, cross-examination, at trial, in this or any other proceeding, or in any other way.
The mediator’s notes and recollections cannot be soepoenaed [sic] in this or any other proceeding.Footnote 63
Justice Lederman went on to address the balance that the court seeks to achieve when weighing competing interests:
[S]ince privilege and confidentiality are critical to the success of the mediation process, they should not be lightly disturbed. Some evidence must be adduced on the motion to demonstrate that the mediator’s evidence is likely to be probative to the issue and that the benefit gained by the disclosure for the correct disposal of the litigation will be greater than any injury to the mediation process by the disclosure of discussions that took place.Footnote 64
On balance, Lederman J believed the mediator could provide important information about the executed settlement and whether it was inconsistent with any prior or oral agreement between the parties. He ordered that the mediator be examined as a witness, but limited questions to any knowledge and understanding he had of whether Kaiser was a party to the mediated settlement agreement.
Leave to appeal the decision was granted and the Ontario Bar Association was granted leave to intervene in view of the importance of the case for mediation confidentiality. As Howden J in the Divisional Court remarked: ‘It is desirable that leave be granted because any added exceptions to the confidentiality principle in mediation will arise again, and as compelling testimony by order is per se an interlocutory matter there is no other way for the issue to be determined.’Footnote 65 He doubted whether the earlier decision was correct ‘because it requires a mediator to in effect cast a tie-breaking vote in a case where he wrote the agreement during the latter stages of the mediation session with input from counsel’.Footnote 66 He added:
The public importance of this (as the first decision re: exception to mediation confidentiality known to counsel who appeared before me) issue in respect of the expectation and significance of confidentiality in … mediation is, I think, self evident.Footnote 67
Justice Howden effectively recognised that mediator testimony would conflict with the core mediation value of neutrality.Footnote 68
The appeal was allowed and the earlier decision set aside. Subject to issues such as fraud or other criminal situations, the Court emphasised that confidentiality is required in order for the mediation process to be successful. As Swinton J stated: ‘In this case, there is an important public interest in maintaining the confidentiality of the mediation process that, in all the circumstances of this case, outweighs the interest in compelling the evidence of the mediator.’Footnote 69 The case illustrates the disparate approaches courts in the same jurisdiction can take with regard to a clear and comprehensive clause that the parties have agreed on to protect mediation confidentiality. The earlier decision did not consider mediation confidentiality to be as important as the public interest in accessing mediation evidence, while the court on appeal disagreed. When a jurisdiction has no statute or rule protecting mediation confidentiality, clear case law is critically important.Footnote 70
The English courts have gone even further in protecting confidentiality clauses in contracts. In David Instance v. Denny Bros Printing Ltd,Footnote 71 the agreement to mediate contained an express confidentiality provision. The parties attempted to mediate their dispute but were unsuccessful. A confidential letter written by the claimant before but in connection with the mediation was subsequently attached as an exhibit to an affidavit in proceedings between the parties. The claimant sought an injunction to restrain the use of that letter and of other material produced in connection with the mediation. Justice Lloyd granted the injunction, remarking that the confidentiality provision in the agreement was wide enough to cover not only material written after the agreement to mediate had been made, but also material relating to the mediation which had been created before the agreement to mediate was formally made.
Another English decision has created some cause for concern. In Farm Assist (No 2),Footnote 72 the mediator could not exempt herself from the duty to comply with a witness summons by arguing she had an express obligation in the mediation agreement not to divulge information or an implied duty of confidentiality arising from the nature of mediation. Mediation confidentiality yielded to the interests of justice in receiving her testimonial evidence for the purpose of assessing whether economic duress invalidated the agreement between the parties. The ‘interests of justice’ test employed by the judge appears to have been satisfied by looking at the issues solely through the prism of the parties’ private rights.Footnote 73 While Ramsey J found that the mediator has a right to confidentiality which the parties themselves cannot unilaterally override, it seems that such a right was not solely dependent on the terms of the mediation agreement but also founded on general principles.Footnote 74
Consequently, confidentiality protection under contract law may be no wider in England than it is under the ‘without prejudice’ rule. However, it may be the basis for the court to rule against production of mediation documents where exceptions to the ‘without prejudice’ rule do not apply or to grant an interim injunction restraining a threatened confidentiality breach of that mediation evidence. Hence, contractual confidentiality in England is enforceable by the mediator and the disputing parties, and it can exclude evidence from a subsequent trial unless the judge decides to admit it in the ‘interests of justice’, which is quite a vague term. As Farm Assist (No 2) is a first instance decision, it would be helpful if there were a definitive appeal court decision on the extent of contractual confidentiality. Alternatively, the legislature in England could follow the approach adopted in the USA and Australia by putting ‘mediation privilege’ on a statutory footing.Footnote 75
In the absence of adequate statutory protection, it is critical that the terms of an agreement to mediate between the mediator and the parties, or confidentiality agreements with other participants and interested parties who may be present at the mediation, clearly express the intentions of the parties regarding confidentiality. In particular, they should specify the elements of the process that the confidentiality obligation covers, the type of information that the confidentiality provision covers, the individuals that can claim confidentiality and the individuals against whom confidentiality can be claimed, the exceptions (if any) to confidentiality, and the mediator’s obligations during and after the mediation regarding information received in confidence during the process.Footnote 76
9.4.2.1 Contracting to Exclude Judicial Access to Mediation Evidence
The issue arises as to whether parties can agree to exclude judicial access to what transpired at a mediation, effectively excluding the exceptions to the ‘without prejudice’ privilege. While this may seem counterintuitive as it would mean that parties could not claim undue influence, for example, some parties may value confidentiality to the extent that they are willing to sacrifice such protection. In Unilever plc v. The Proctor & Gamble Company, Walker LJ remarked: ‘there seems to be no reason in principle why parties to without prejudice negotiations should not expressly or impliedly agree to vary the public policy rule in other respects, either by extending or limiting its reach.’Footnote 77 However, there does not appear to be clear authority in England on this point.
In Union Carbide Canada Inc v. Bombardier,Footnote 78 a global purchaser/supplier dispute was mediated. The agreement contained confidentiality provisions but no signed writing clause. Later one of the parties claimed that the settlement covered only the Canadian part of the claim, not the global dispute, and sought to elicit evidence of what transpired during the mediation to support this. The Canadian Supreme Court held that the exceptions to the ‘without prejudice’ privilege could be set aside by contractual confidentiality, but only on clearly drafted terms. As Wagner J remarked: ‘In principle, there is relatively little that can displace the intent of the parties once it is clearly established.’Footnote 79 The terms of the agreement were not sufficiently clear in this case, as there was no signed writing clause, and the evidence of what transpired at the mediation was consequently admitted. Had a signed writing clause been included, it could have excluded the exception that ‘without prejudice’ evidence could be admitted to confirm whether agreement had been reached.Footnote 80
9.4.2.2 Mediation Rules and Guidelines
The duty of confidentiality can also result from the rules or guidelines established by the organisation under which the mediation takes place, incorporated by reference into the mediation clause or agreement to mediate between the parties. If a mediator breaches such rules, this could result in expulsion from the organisation; this can have a significant deterrent effect. Rules and guidelines are organic instruments and can be changed with relative frequency by the relevant organisation to reflect the changing nature of the process and the legal framework in which it operates. For example, in light of a Supreme Court of New South Wales decision, the New South Wales Law Society altered its guidelines for lawyer mediators. The Court held that where facts, information about which is revealed in the course of mediation, are discoverable in the normal course, evidence of these facts will be admissible in proceedings.Footnote 81 The Law Society now adopts a cautious approach:
The mediator shall inform the parties that, in general, communications between them, and between them and the mediator, during the preliminary conference and the mediation, are agreed to be confidential. In general, these communications cannot be used as evidence if the matter does not settle at the mediation and goes to a court hearing. The mediator shall also inform the parties that they should consult their legal practitioners if they want a more detailed statement or if they have any specific questions in relation to confidentiality.Footnote 82
While institutions often have slightly different approaches, the approach adopted under most rules with regard to the general duty of confidentiality is to impose on the parties and the mediator an obligation not to disclose any information about mediation proceedings in the absence of the parties’ agreement to the contrary and/or subject to applicable law.Footnote 83 This duty tends to cover the settlement agreement, subject to any disclosure required for its implementation or enforcement.Footnote 84 In terms of the admissibility of mediation communications as evidence in subsequent judicial, arbitral or similar proceedings, the common approach is to provide a list of prohibited disclosures that will only be produced as evidence when agreed to by the parties or required by applicable law.Footnote 85 The possibility of the mediator acting as a witness in future proceedings tends not to feature as frequently in institutional rules.Footnote 86 Similarly, the flow of information within the mediation tends not to be covered, as most rules leave this to the parties and the mediator to agree.Footnote 87 Where rules regulate this form of confidentiality, they tend to reflect the ‘open communication’ approach rather than the more widely accepted ‘in-confidence’ approach. This is contrary to the more widely accepted international approach of only sharing information outside of caucus where explicit consent is given.Footnote 88 If the ‘open communication’ approach is reflected in the institutional rules that are to govern a mediation, it is important that parties are aware of the importance of providing in their agreement to mediate that this rule is disapplied, and incorporate the more internationally prominent ‘in-confidence’ approach to caucus communications in their agreement if this is their preference.
9.4.3 Equitable Remedy for Breach of Confidence
Where individuals who receive information in confidence make unauthorised use of it and contract law does not provide an effective remedy, equity may be exercised by a court in granting relief against an actual or a threatened abuse of confidential information. The information to be protected must have the required quality of confidence about it, which in a commercial context could, for example, be a trade secret; it must have been communicated in a context requiring an obligation of confidence and there must be unauthorised use of it.Footnote 89 As a result of the relationship that exists between a mediator and disputing parties, in a context where the mediator’s role is to assist parties with their negotiations, a court of equity could protect confidential communications that are disclosed by a mediator without authorisation. The disclosures would include admissions, views or suggestions made by either party about a possible settlement; any proposal put forward by the mediator where an evaluative style is adopted; and any indications of a willingness on the part of either party to accept such proposals.Footnote 90 Where there is a breach, the affected party could seek an injunction,Footnote 91 and if the mediator’s use of the information was for their own benefit, restitution of any profits acquired could be ordered, with damages also being ordered in appropriate circumstances. A mediator could raise a public interest defence where the information disclosed relates to a party’s complicity in fraud or criminal activity. However, where there are alternative remedies available, equity is not likely to be a prominent means of protecting mediation confidentiality.Footnote 92
9.4.4 Confidentiality and Conflicts of Interest
Circumstances can provide opportunities for communications that can undermine mediation confidentiality.Footnote 93 The concern can also arise that lawyers acting for one party in a mediation could acquire information that could be used against the other party in subsequent proceedings. In England, a solicitor can act against a former client, even where the solicitor’s firm holds confidential information relating to the client, where the client consents, or, if the client does not consent, where the solicitor can act consistently with their confidentiality obligations or other fiduciary duties owed to the client.Footnote 94 In making this determination, the possibility of increased risk of disclosure or misuse of a former client’s confidential information must be considered. While the risk does not have to be substantial, it should be real, rather than theoretical. With regard to mediators, agreements to mediate usually prohibit a mediator from acting for or against a party in relation to a dispute where the mediator received confidential information in the course of the mediation. Codes of conduct can include similar requirements.Footnote 95
9.4.5 Allegations of Fraud and Criminality
Allegations of fraud or other criminal conduct taking place during a mediation can be a basis for setting confidentiality aside in order to admit the relevant evidence. However, jurisdictions deal with this issue in different ways. Within Australia, for example, in New South Wales it is an offence simply to conceal a serious crime,Footnote 96 while in Victoria it is only an offence if the person receives a benefit from the non-disclosure.Footnote 97 While these laws may exonerate lawyers if they receive such information when practising their profession, this does not apply to mediators.Footnote 98
In England it is an offence for a person to become concerned in an arrangement they know or suspect will facilitate the acquisition or control of criminal property by another person, unless they make an authorised disclosure.Footnote 99 However, if a mediator makes a disclosure that is not required under the Proceeds of Crime Act 2002 (UK), they may be sued for breach of confidence. The UK Civil Mediation Council has issued guidance indicating that it may be necessary for a mediator, whether a legal professional or not, to either withdraw from a mediation or make a report under the Act.Footnote 100
9.4.6 Statute
There are two primary reasons for statutory rules on confidentiality or privilege. First, state regulation is required where the parties cannot create their desired confidentiality by contract. For example, procedural law rules, such as the rules on the admissibility of evidence, are not open to contracting. Second, statutory confidentiality rules may be required where the parties waive confidentiality ex ante (before the event) only rarely, as with the confidentiality duty of the mediator.Footnote 101 If statutes were to provide comprehensive confidentiality protection, there would be no need for contractual protection as interpreted by the courts.
Privilege and secrecy provisions are often used in statutes dealing with mediation to protect the confidentiality of the process and reinforce the common law position, and sometimes extend it by providing increased protection for parties and broader obligations for mediators. While there is no internationally recognisable consensus on the appropriate extent of confidentiality, some statutes provide that the process is confidential and that evidence of what is said or admitted in a mediation is inadmissible in any proceedings before any court, and that documents prepared for the purposes of or in the course of a mediation are inadmissible.Footnote 102 The statutory provisions usually contain exceptions to the general grant of privilege.Footnote 103
In Australia, there is no comprehensive federal law on confidentiality, but a range of statutory privileges. In New South Wales, the privilege applies in relation to any ‘tribunal or body’, and mediation is defined broadly to include steps taken to arrange mediation meetings or follow-ups to meetings,Footnote 104 while in Queensland, privilege is extended to mediation sessions and documents sent to or produced at a Dispute Resolution Centre for the purpose of arranging mediation.Footnote 105
In the USA, rules of evidence, privileges, confidentiality and disclosure statutes and rules are all primary sources of rules governing confidentiality in mediation. Almost every state has adopted a rule of evidence to protect the confidentiality of settlement discussions. The key provision, rule 408 of the Federal Rules of Evidence covering compromise offers and negotiations, is known as the settlement negotiation rule and has been applied to mediations. It has served as the model for many state rules. It is a rule of evidence, rather than a guarantee of confidentiality, and is narrower than a privilege, which can be claimed at the discretion of the privilege holder for any purpose. The purpose of the rule is to prevent a party from using settlement negotiations to gain a litigation advantage by limiting what litigants can offer in evidence in a court proceeding. It does not typically affect what parties or third parties can disclose in any other context, and it has many exceptions. Evidence from the USA suggests that rules of evidence can be difficult to enforce, as parties who evade them ordinarily risk a judicial reprimand at most.Footnote 106
A privilege bars the admission of evidence, regardless of the purpose for which it was offered, and is therefore less subject to evasion than an evidentiary rule such as rule 408. A violation of a privilege can also give rise to a cause of action for damages. While courts almost always apply their own rules of evidence, this is not the case with privileges. Whether a privilege applies may depend on choice of law principles if the mediation takes place in one state and the case later goes to trial in another, making the outcome difficult to predict. There is no general mediation privilege in US federal proceedings, and federal courts can apply either state or federal privilege rules depending on the claim.Footnote 107 This can make it difficult to predict how confidential communications will be treated in federal courts. The rules on what phases of the mediation process are covered by privilege vary from state to state and can be poorly defined. As only those who hold the privilege can invoke it, it leaves the mediator without protection unless a party agrees to protect them from testifying. While the Uniform Mediation Act grants mediators the right to prevent disclosure of their own mediation communications,Footnote 108 Californian law goes significantly further, providing that the consent of both the mediator and the parties is required for anyone to testify regarding the content of a mediation, and the mediator may not testify at all.Footnote 109
While neither the US legislature nor the federal courts have provided any general guarantee of mediation confidentiality, provisions exist in specific federal statutes.Footnote 110 Section 652(d) of the Alternative Dispute Resolution Act of 1998 (US) requires that federal district courts adopt local rules to provide for the confidentiality of alternative dispute resolution (ADR) processes within their court-connected programmes. Consequently, parties are more likely to find confidentiality protected in federal cases if they mediate under the auspices of a court ADR programme than if they privately mediate the dispute. Mediation programmes in state courts also typically provide similar mediation confidentiality protection, but their rules often do not specify what is meant by confidentiality.Footnote 111
9.4.6.1 The EU Mediation Directive
Under the EU Mediation Directive,Footnote 112 EU Member States are required to ensure that, unless the parties agree otherwise, neither mediators nor those involved in the administration of the mediation process will be compelled to give evidence in civil and commercial judicial proceedings or arbitration regarding information arising out of or in connection with a mediation process. Exceptions include circumstances where the information is required to implement or enforce a mediated settlement or where there are overriding reasons of public policy such as child protection or prevention of personal harm.Footnote 113
While the Mediation Directive establishes a privilege for mediators to refuse to testify in subsequent adjudicative proceedings, it is silent on the ‘without prejudice’ rule. Nor does it address mediation participants such as parties and lawyers and their obligations regarding the admissibility of mediation evidence in subsequent court or arbitral proceedings. While there may be domestic privileges or other legal protections, these may permit potential gaps in, and opportunities for challenges to, confidentiality.
The Directive’s confidentiality provision covers ‘information arising out of or in connection with a mediation process’, which is very broad and seems to cover documentation and conversations about the mediation that occur before, after or between mediation sessions or that are distinct from the mediation sessions themselves. There is still significant diversity in the law of mediation confidentiality within the European Union. Given that this is one of the most litigated aspects of mediation, legal advisors and parties are advised to examine the applicable law on confidentiality before engaging in cross-border mediation.Footnote 114
9.4.6.2 The UNCITRAL Mediation Model Law
The main provision in the Mediation Model LawFootnote 115 dealing with the general obligation of confidentiality in mediation is article 10, which states:
Unless otherwise agreed by the parties, all information relating to the mediation proceedings shall be kept confidential, except where disclosure is required under the law or for purposes of implementation or enforcement of a settlement agreement.
This is preceded by article 9, which protects information entrusted to the mediator in caucus, if the relevant party requires that it not be disclosed to the other side. Article 9 reflects the ‘open communication’ approach rather than the more commonly used ‘in-confidence’ approach, reversing the more widely accepted presumption in many jurisdictions.Footnote 116 If this law were to act as a framework in a particular jurisdiction,Footnote 117 or if parties incorporated its provisions into their agreement to mediate, it would require revision to be made consistent with predominant international practice and reflect the more widely accepted ‘in-confidence’ presumption that a mediator may only divulge information to a party when explicitly permitted to do so by the party furnishing the information.
The third form of confidentiality, covering the non-disclosure of information in pre-trial discovery or in evidence in arbitral, judicial or similar proceedings is covered by article 11. Hence, confidentiality applies regardless of whether or not the mediated dispute is the same dispute that is subject to the court or arbitral proceedings where the disclosure is being sought, which broadens the scope of confidentiality.Footnote 118
While the Mediation Model Law provisions are more comprehensive than the EU Mediation Directive, the confidentiality provisions – like most aspects of the Model Law – are subject to the overarching objective of enhancing party autonomy. Consequently, by mutual agreement the parties can vary the level of confidentiality protection.Footnote 119
9.4.6.3 The Uniform Mediation Act and California’s Rule of Evidence
Statutory protection of mediation confidentiality is the solution adopted by a large number of states in the USA, as well as by the drafters of the Uniform Mediation Act.Footnote 120 With the growth of mediation, by 2001 there were over 2,500 separate state statutes or rules relating to mediation in the USA. The Uniform Mediation Act was adopted that year by the National Conference of Commissioners on Uniform State Laws to deal with the different provisions relating to mediation across the nation, with the principal purposes of assuring confidentiality and fostering uniformity. While the Uniform Mediation Act is intended to create a baseline or minimum confidentiality standard, it does not supplant more stringent state confidentiality requirements. It provides a mechanism for protecting mediation confidentiality and specifies limited exceptions where other policy considerations take priority.Footnote 121
Privileges regarding confidential professional relationships are common in the USA: examples are the attorney–client and psychiatrist–patient privileges. Many originate from the code of ethics of a professional organisation or statute. They usually include a duty to keep information confidential and an exemption from involuntary testimony. The mediation context is different from other contexts where the duty of confidentiality is imposed on the professional but not on the client; the mediator–disputant privilege created by the Uniform Mediation Act is imposed on both the mediator and all other mediation participants. Similarly, the other privileges do not necessarily prevent a third party from attempting to compel testimony on these issues, while the mediator–disputant privilege is absolute unless there is an exception or a waiver. In addition, the other privileges do not prevent a client from making voluntary disclosures outside arbitral or judicial proceedings, whereas the mediator–disputant privilege created by the Uniform Mediation Act is intended to prohibit this.Footnote 122
Framing confidentiality as an evidentiary privilege means legislators can clearly define the extent of the privilege regarding the mediation information and activities covered; the people the privilege affects, including who can invoke or waive it and the extent to which this can be done; the subsequent proceedings the privilege will apply to; and the information excepted from the privilege. In maintaining mediation confidentiality this approach can also accommodate the separate, and possibly conflicting, interests of the mediator and participants. This approach has been adopted in sections 4, 5 and 6 of the Uniform Mediation Act. Section 4Footnote 123 creates the privileges of the participants in the mediation, section 5Footnote 124 details who is permitted to waive the relevant privileges, and section 6Footnote 125 provides the exceptions to the privileges.Footnote 126
The chief purpose of the Uniform Mediation Act is to ensure that mediation communications remain confidential to make mediation a fairer, more effective and more attractive means to settle disputes. Many US states have refused to adopt the Uniform Mediation Act despite its invitation to incorporate existing state laws, largely because existing state mediation laws, particularly those dealing with confidentiality, are already much stronger than the Uniform Mediation Act.Footnote 127 California provides an interesting example of a state that has gone considerably further than the Uniform Mediation Act in protecting mediation confidentiality. In California, the first form of confidentiality – where a party shares information with the mediator in caucus – is contained in rule 3.854(c) of the California Rules of Court.Footnote 128 Similar to many institutional rules,Footnote 129 it provides that the mediator must keep information that was shared in caucus confidential, unless express consent to disclose it to others in the mediation is provided by the person sharing it. The Uniform Mediation Act does not have a corresponding provision.Footnote 130
The second form of confidentiality – the general obligation on the mediator and all participants not to disclose information to any third party – is covered in California by section 1119(c) of the Evidence Code, which provides: ‘All communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential.’ The equivalent provision is section 8 of the Uniform Mediation Act, and was inserted after extensive discussion regarding the usefulness of the provision. The reluctance of the Drafting Committee to adopt it is clear from the text:
Unless subject to the [insert statutory references to Open Meetings Act and Open Records Act], mediation communications are confidential to the extent agreed by the parties or provided by other law or rule of this State.
Section 8 of the Uniform Mediation Act effectively bars confidentiality of mediation communications unless and to the degree that the parties have agreed to it, or another law or rule of the state provides differently. The mediator’s consent is not required. Section 1119(c) of the Evidence Code is at the other end of the spectrum, as it provides for a broad duty of confidentiality from which a departure can only be made under section 1122(a), which effectively requires the express written agreement of all parties and the mediator.Footnote 131
The third form of confidentiality is covered in California by section 1119(a) (for oral communications) and (b) (for writings) of the Evidence Code. These provide in principle that evidence of information disclosed in a mediation is inadmissible, both in pre-trial discovery and in arbitral and non-criminal judicial proceedings.Footnote 132 Section 1120(a) of the Code provides the general exception:
Evidence otherwise admissible or subject to discovery outside of a mediation or a mediation consultation shall not be or become inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation or a mediation consultation.
In addition to this general exception, section 1119(a) and 1119(b) of the Evidence Code, by limiting the protection of mediation communications to non-criminal proceedings, effectively excludes criminal proceedings from the inadmissibility rule. In addition, section 1120(b)Footnote 133 provides specific exceptions to the exclusionary rule of section 1119 relating to (1) an agreement to mediate; (2) any agreement not to take a default or to extend time to act in a pending action; and (3) the fact that a particular mediator served or was otherwise involved in a mediation, so that these three elements are admissible in any subsequent proceeding. The provisions of sections 1119 and 1120 are not mandatory, and can be waived by agreement among all participants in the mediation, including the mediator, by section 1122(a) of the Code.Footnote 134
The scope of sections 1119 and 1120 is uncertain, and it can be difficult to distinguish between documents, photographs, etc. that have been ‘prepared for the purpose of, in the course of, or pursuant to, a mediation’, and evidence otherwise admissible that ‘shall not be or become inadmissible or protected from disclosure solely by reason of its introduction or use in a mediation’. This problem was central to Rojas v. Superior Court.Footnote 135 In this case, the California Supreme Court overturned the Court of Appeal’s ruling that had devised an exception to mediation confidentiality to help plaintiffs in a subsequent proceeding access documents that the trial court had held, as a non-appealable finding of fact, were created exclusively for the mediation. The Supreme Court held that the confidentiality of mediation communications is absolute as it applies to evidence prepared for the sole and limited purpose of mediation, with the exception being evidence that is expressly specified by statute.Footnote 136
Before embarking on a specific discussion of Rojas, three preceding cases that redefined the relationship between mediators and the courts in California warrant a mention. In Olam v. Congress Mortgage Co,Footnote 137 a federal court ordered a mediator to testify as to whether an agreement signed in mediation was the product of duress or free will. The parties asked that the mediator testify. The judge assumed that the mediator would object, and ruled that, even over such an objection, the mediation privilege was subordinate to the orderly administration of justice.Footnote 138
In Rinaker v. Superior Court,Footnote 139 two juveniles accused of a crime had participated in an earlier mediation during which a witness made statements that would contradict critical testimony he would offer at trial.Footnote 140 The trial judge ordered the mediator to testify, and the California Court of Appeals held that the juvenile proceeding was like any other civil matter, but that mediation confidentiality was subordinate to the ‘constitutional right to effective impeachment’.Footnote 141
In Foxgate Homeowners’ Association v. Bramalea California Inc,Footnote 142 the court ordered mediation and the parties stipulated that the mediation would be a procedure in which experts would debate the merits of the claim. The plaintiff brought nine experts, while the defendant arrived late, bringing none. The mediation ended early. With no progress being made, the mediator filed a report with the court indicating that the defendant had shown bad faith and should be sanctioned. The trial court acknowledged the mediator’s report and awarded $30,000 in damages. The defendant appealed and the appellate court ruled that the mediator’s report could be considered in a case involving sanctions without infringing unduly on mediation confidentiality.Footnote 143 The California Supreme Court took a different view and held that confidentiality was to be respected even in a sanctions case.Footnote 144
The case of RojasFootnote 145 provides a further example of the dilemma that arises when the policy that requires parties to disclose all relevant evidence conflicts with the policy that supports mediation confidentiality. In this case, the policy of disclosure prevailed in the Court of Appeal, while the policy of mediation confidentiality ultimately prevailed in the Supreme Court.Footnote 146
The background to this case involved Julie Coffin and others who purchased a building complex in Los Angeles in 1994. In December 1996, they filed a construction defect actionFootnote 147 against the developers, contractors and subcontractors (‘developers’). They alleged that water leakage resulted from poor construction work, which caused the presence of toxic moulds and other microbes on the property.Footnote 148 The parties mediated the dispute and settled the underlying action in April 1999. As it was in both parties’ interests to keep this evidence concealed from the tenants who may have suffered injury by the presence of toxic mould when they lived at the building complex, the parties specifically agreed in their mediated settlement agreement that the defect reports, repair reports and photographs for informational purposes were protected by section 1119Footnote 149 of the California Evidence Code and section 1152 – an exclusionary rule relating to negotiations in compromise of litigation – and that the materials and information they comprised would not be published or disclosed without the prior consent of Coffin or by court order.Footnote 150
In August 1999, Rojas and almost 200 other tenants of the building complex including minors (‘Rojas’) began an action against Coffin and some of the contractors. They claimed that they had not been aware of the building defects until April of that year, when the remedial work had commenced, and that Coffin and the developers colluded to conceal the defects and microbe infestation from them. The trial court indicated it was concerned about applying the mediation privilege to raw evidence, as the photographs were just fixed representations of the state of a place at a particular time, and that if there was no alternative way for the plaintiff to get the relevant evidence, the mediation privilege was not meant as a device to block such evidence. However, it felt bound by the statutory language and ruled that the materials were protected from discovery, despite the showing of necessity by Rojas.Footnote 151
The Court of Appeal rejected Coffin’s reading of sections 1119 and 1120 that all materials introduced at the mediation, or prepared for the mediation, including those of a purely evidentiary nature, are incorporated within the scope of the privilege because they were ‘prepared for the purpose of, in the course of, or pursuant to’ the mediation. The Court remarked that ‘such a reading would render section 1120 complete surplusage and foster the evils it is designed to prevent: namely, using mediation as a shield for otherwise admissible evidence’.Footnote 152 The Court of Appeal found that non-derivative material such as raw test data, photographs and witness statements are not protected by section 1119, and, to the extent that any of the materials sought are part of a compilation, they would have to be produced if they could be reasonably separated from the compilation. The Court also noted that, as Rojas had not been joined in the prior lawsuit, and as Coffin’s and the developers’ remediation works had eliminated most, if not all, of the relevant evidence, Rojas had no other means of acquiring this information.Footnote 153
The Supreme Court delivered its opinion confirming ‘absolute confidentiality’ in July 2004. In reversing the Court of Appeal’s decision, which had argued that an interpretation such as the one advocated by Coffin, would render section 1120 ‘surplusage’, Ming Chin J, delivering the opinion for a unanimous Supreme Court, noted that the Court of Appeal’s construction of section 1119(a) would mean that section 1119(b) would serve no purpose, and would result in that section being ‘essentially useless’. It also found that the Court of Appeal’s decision was inconsistent both with the plain meaning of section 1119 and the legislative history of sections 1119 and 1120.Footnote 154 Referring to its earlier decision in Foxgate,Footnote 155 the Supreme Court emphasised that:
‘[C]onfidentiality is essential to effective mediation’ because it ‘promote[s] a candid and informal exchange regarding events in the past’ … This frank exchange is achieved only if the participants know that what is said in the mediation will not be used to their detriment through later court proceedings and other adjudicatory processes.Footnote 156
The Supreme Court also recalled that in Foxgate it had:
stated that ‘[t]o carry out the purpose of encouraging mediation by ensuring confidentiality, [our] statutory scheme … unqualifiedly bars disclosure of specified communications and writings associated with a mediation ‘absent an express statutory exception’. We also found that the ‘judicially crafted exception’ to section 1119 there at issue was ‘not necessary either to carry out the legislative intent or to avoid an absurd result’. We reach the same conclusion here; as Judge Mohr observed, ‘the mediation privilege is an important one, and if courts start dispensing with it by using the (Court of Appeal) … test you may have people less willing to mediate.’Footnote 157
The Supreme Court’s interpretation does not distinguish between writings marked before their introduction into a mediation and writings marked towards the end of the process. The interpretation of sections 1119 and 1120 adopted by the Court does not prevent a party to a mediation in a litigated case declaring certain writings to be ‘prepared for mediation’ at a time that the parties know they have a settlement, so that those writings can be excluded from subsequent proceedings.Footnote 158 A practical solution would result in the statute being amended in order that the mediation privilege would attach only to those writings that have been marked ‘prepared for mediation’ before their introduction into a mediation, and also expressly authorising a trial court to weigh the interests of the two conflicting public policies in a subsequent trial, whether it is between the same parties or involves one or more third parties. With this type of discretionary authority, in appropriate circumstances the court could admit such a writing despite the proposed rule of its subsequent inadmissibility, if the interests of access to evidence in litigation outweighed the interests of keeping it confidential because it had been prepared for mediation; for example, where there is no other way for a party to acquire such evidence as it no longer exists.Footnote 159
Subsequent to Rojas,Footnote 160 the California Supreme Court appears to have maintained its ‘absolute confidentiality’ approach. In Simmons v. Ghaderi,Footnote 161 the Supreme Court unanimously reversed the decision of the Court of Appeal and refused to allow evidence of what had transpired in mediation. The parties reached an oral agreement at mediation, but before signing it, Simmons withdrew from the mediation and refused to sign the written agreement that gave effect to the oral agreement. Ghaderi sought to enforce the settlement with a declaration from the mediator outlining events at the mediation. The Supreme Court held that the doctrine of estoppel could not be used to create a judicial exception to the comprehensive scheme of mediation confidentiality. In the course of its judgment, the Supreme Court referred to its disapproval of ‘judicially crafted’ exceptionsFootnote 162 to mediation confidentiality statutes it had condemned in Foxgate.Footnote 163
In Cassel v. Superior Court,Footnote 164 an action for legal malpractice was taken by a client against his attorneys based on what transpired during the mediation of an underlying lawsuit. It was alleged that bad advice, deception and coercion, on the part of his attorneys, induced him to settle the claim at an undervalue. The trial court granted the defendant’s request for a motion, before the malpractice trial, to exclude all evidence of private attorney–client discussions before and during the mediation relating to mediation settlement strategy and efforts to persuade the client to settle during the mediation. The Court of Appeal subsequently reversed the order, on the basis that the statutory regime for mediation confidentiality is intended to prevent the damaging use against a mediation ‘disputant’ of strategies employed, or opinions and information exchanged during a mediation, and not to protect attorneys from malpractice claims.
The Supreme Court revisited Foxgate,Footnote 165 RojasFootnote 166 and SimmonsFootnote 167 and concluded:
[T]he plain language of the mediation confidentiality statutes controls our result. Section 1119, subdivision (a) clearly provides that ‘[n]o evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation … is admissible or subject to discovery’ … Plainly, such communications include those between a mediation disputant and his or her own counsel, even if these do not occur in the presence of the mediator or other disputants.Footnote 168
The Supreme Court also relied on the exceptions in section 1122 of the Evidence Code, which provides for the admissibility of communications where not all mediation participants confirm disclosure of otherwise confidential information, provided the disclosure does not reveal ‘anything said or done … in the course of the mediation’.Footnote 169 In addition, the Court rejected the Court of Appeal’s focus on ‘disputants’ noting that ‘[t]he protection afforded by these statutes is not limited by the identity of the communicator’.Footnote 170 Consistent with its well-established doctrine, the Court was unwilling to create a judicially crafted exception to absolute mediation confidentiality outside the express statutory language.
RojasFootnote 171 demonstrated the courts’ concern about making mediation evidence inaccessible where a party declares certain writings to be ‘prepared for mediation’ at a time that the parties know they have a settlement, to ensure those writings can be excluded from subsequent proceedings. Laws ostensibly designed to strengthen mediation as a dispute resolution process may also, ironically, reduce constraints on using misrepresentation to create bargaining power within the process. Decisions such as Foxgate,Footnote 172 Rojas and the jurisprudence that has followed demonstrate that the courts’ strict interpretation of the California Evidence Code, as providing an absolute privilege for statements made in mediation, strongly suggests that evidence of deceit during the process cannot be introduced into evidence in court for any reason. In jurisdictions that recognise an absolute mediation privilege, contract and tort law may technically limit parties’ ability to use deceit to create bargaining power, while evidence law effectively makes these limitations unenforceable.Footnote 173
9.5 Concluding Thoughts
Confidentiality in mediation involves striking a balance between encouraging settlement through a protected process and ensuring that litigants and courts have adequate access to evidence; between supporting mediation and not freezing litigation or upholding illegality. While the principle of sanctity of contract supports maintaining confidentiality where there is an agreement, if it is too wide, it will sterilise too much evidence and seriously undermine the trial process, and if it is too narrow, it will discourage parties from engaging in good faith in mediation. There is often a lacuna between the general perception that complete confidentiality applies to the participants in a mediation, and the more limited protection conferred by the courts. Where the information given to parties at the start of the process does not equate with the legal position if the issue later comes before a court, this will raise concerns about the parties’ informed consent.Footnote 174 The practical implication of mediation confidentiality’s legal complexities is to use caution when promoting and explaining the process to disputants, and to advise them that there may be limits on the extent to which courts will protect communications made during the process.Footnote 175
While the approach of making mediation confidentiality ‘absolute’ seems to create a straightforward rule suitable to an informal process, experience demonstrates that absolute rules can be an overreaction to the shortcomings of more liberal evidentiary rules, statutes and contractual arrangements. Restricting disclosure to specific circumstances or discrete contexts can cover matters with a veil of privilege that may prove difficult to circumvent where necessary. Many US states have resisted implementing the Uniform Mediation Act on the basis that courts should maintain the right to circumvent the privilege where the interests of justice require it. Some have also suggested that the provisions of the Act go too far in protecting mediators against legitimate state interests. It has also been suggested that some provisions are hostile to the areas of practice that made mediation the popular process it has become, and, while it is reasonable to expect some consistency when participating in the mediation process, mediation must adapt to the needs of the parties and the parameters of the dispute being mediated. Mediation flourished due to the diversity and adaptability of the process; these qualities are inconsistent with absolute rules, and these may, it has been suggested, prove to be incompatible with uniform laws.Footnote 176
An alternative approach in common law countries would involve the creation of a mediation privilege that appreciates the distinct nature of the process and protects mediation evidence including communications made in the course of the mediation.Footnote 177 Disclosure of documents and communications within a mediation could be admitted in limited circumstances to be specified by the court on a case-by-case basis. This more generalised formulation – recognising a distinct mediation privilege – would give clear protection to virtually all mediation communications. On the occasional circumstance when the veil of privilege needed to be dislodged, it could allow the court greater latitude than prescriptive, static exceptions.Footnote 178
This approach could provide the flexibility that the mediation process requires, by dealing with issues on a case-by-case basis, balancing public policy considerations, the requirements of the process and the needs of participants and third parties. Commercial courts will increasingly be panelled with judges who have experience of the mediation process. Continued training and education of the judiciary will help ensure that the courts are familiar with commercial mediation. Specialised judges with experience and expertise in the commercial mediation process gained while in practice as a legal advisor or mediator or both, could be deployed within the commercial courts to deal with mediation-related issues. This would ensure that the judge who decides if an exception to the privilege is justified has knowledge of both the process and its legal limitations.Footnote 179 The emerging jurisprudence would give mediators, lawyers and parties clear guidance about the contours of mediation privilege and what they can expect in the jurisdiction where they are mediating.
While mediation privileges bar evidence from being admitted in adjudication, they do not bar disclosure outside court proceedings; consequently, privilege does not equate to comprehensive confidentiality. There is nothing to stop those with information sharing it outside a court proceeding. In the absence of a comprehensive mediation statute, for confidentiality protection the parties must enter into an agreement.Footnote 180 Coupled with other forms of regulation, such as statute and common law, contractual terms can be helpful in securing the level and type of confidentiality required. Confidentiality provisions should clearly reflect the scope of confidentiality; who possesses the rights or obligations; what is protected; the temporal coverage, including whether preliminary meetings, interim and follow-up contact is included; and whether any exceptions are required. Contractual confidentiality is also helpful in clarifying the existing law and the parties’ intentions, especially regarding discretionary law and any lacuna that may appear in existing regulation. For example, neither the EU Mediation Directive nor the Uniform Mediation Act provides for the confidentiality of caucus sessions or the general duty of confidentiality with regard to outside parties, leaving it to the parties, in the absence of supportive domestic legislation, to contract for this protection.Footnote 181
The extent of mediation disclosure is best provided for in the agreement to mediate and any ancillary confidentiality agreements with other mediation participants and support staff. Parties and their advisors should consider how best this can be achieved through appropriate drafting to ensure that all relevant information and individuals are covered. However, contracts that traverse national borders and legal cultures are tempered by national legal culture, domestic public policies and mandatory forms of regulation. The relevant jurisdiction is likely to be where litigation may take place, rather than where the mediation occurred. Effective mediation confidentiality requires an investigation into and analysis of the extent to which national courts recognise contractual confidentiality undertakings in the relevant jurisdictions. Parties should be aware of the extent of confidentiality protection to ensure there are no unintended or commercially harmful disclosures.Footnote 182
Confidentiality in commercial mediation is likely to receive cumulative protection. Commercial parties in most cases will have signed an agreement to mediate. This will be reinforced if the agreement incorporates a set of institutional rules that contain confidentiality provisions. If the institution administers the mediation, the mediator may be bound by a duty to maintain confidentiality comprised in any standards adopted by the institution. National legislation may also play an essential role where it requires the help of courts in upholding the contractual nature of the confidentiality obligation.Footnote 183 While contract offers the best opportunity to tailor confidentiality to specific commercial legal requirements, it is at the mercy of the relevant court in terms of enforcement. In the context of the number of mediations taking place, experience from the USA reveals encouraging evidence that very few cases come before the courts raising confidentiality issues. Those reported cases that do so largely arise from court mediation programmes where parties are compelled to participate, suggesting that there is generally greater compliance where the process is private and voluntary.Footnote 184
